TIDMKMK
RNS Number : 3285O
Kromek Group PLC
31 January 2023
31 January 2023
Kromek Group plc
("Kromek" or the "Group")
Interim Results
Kromek Group plc (AIM: KMK) , a leading developer of radiation
and bio-detection technology solutions for the advanced imaging and
CBRN detection segments, announces its interim results for the six
months ended 31 October 2022.
Financial Summary & Outlook
-- Revenue increased by 44% to GBP6.8m (H1 2022: GBP4.7m)
-- Gross margin of 40.4% (H1 2022: 46.8%)
-- Adjusted EBITDA* was GBP2.7m loss (H1 2022: GBP0.6m loss),
primarily reflecting FX impact and inflation related costs
-- Substantial order book and good visibility into H2, with 91%
of forecast FY revenue already awarded, contracted, shipped or
provided by regular repeat business
-- Expect to be EBITDA positive and broadly cashflow neutral in H2
-- Cash and cash equivalents at 31 October 2022 were GBP1.0m (30 April 2022: GBP5.1m)
o Cash position improved post period, with cash and cash
equivalents of GBP1.3m at 23 January 2023
-- Expecting strong revenue growth in H2 with continued contract
wins in both the CBRN detection and advanced imaging segments.
Engaged with eight tier 1 and tier 2 OEMs in key target area of
medical imaging and Board expects to announce a number of contracts
across the Group in the near term
-- On track for record revenue for FY 2023: Kromek expects to
report over 45% year-on-year growth
*A reconciliation of adjusted EBITDA can be found in the
Financial Review.
Operational Summary
Advanced Imaging
-- Strong revenue growth with delivery under component supply
agreements and increased customer engagement for future
projects
-- Excellent progress in medical imaging:
o Significant expansion in customer engagement for development
programmes in key target areas of single photon emission computed
tomography ("SPECT") and photon-counting computed tomography
("CT")
o Launch by Spectrum Dynamics Medical ("Spectrum Dynamics") of
the world's first digital SPECT/CT scanner for higher energy
imaging, which uses Kromek detectors
o Won two new orders worth a total of $751k from existing OEM
customers
o Post period, received GBP2.5m in funding from Innovate UK for
two programmes to further develop a low dose molecular breast
imaging ("MBI") technology based on Kromek's CZT-based SPECT
detectors
Chemical, Biological, Radiological and Nuclear (" CBRN")
Detection
-- Significant momentum in nuclear security, with the winning
and delivery of new and repeat orders, participation in a greater
number of tenders and establishing key distribution
partnerships:
o Received and delivered two orders from existing US customers
totalling $2m for the Group's D3S-ID and D3M wearable nuclear
radiation detectors
o Secured a distribution agreement with Smiths Detection to
distribute the Group's nuclear security solutions to North and
South American markets, which was expanded post period to include
the Middle East and certain key markets in Asia and Australasia
o Post period, the Group was awarded and delivered two
contracts, totalling GBP1.5m, for the supply of its D3M and
D3S-based product lines to European government end-users; and
received a repeat order, for $836k, from a US government customer
for the D3S-ID
-- Post period, received a GBP4.9m contract from a UK government
department for a three-year programme to deliver bio-security
solutions
Manufacturing and IP
-- Expanded production capabilities and implemented several
productivity improvements leading to further cost efficiency in CZT
manufacturing
-- 4 new patents filed and 2 granted during the period
Dr Arnab Basu, CEO of Kromek, said: "This has been a record six
months for Kromek. We've generated our highest ever revenue in an
interim period while building our substantial pipeline for the full
year and beyond. Our engagement with customers and potential
customers in advanced imaging and CBRN detection has grown
significantly. In our key target market of SPECT/CT, we are now
working with eight tier 1 and tier 2 OEMs to get qualified and
designed into their next-generation medical imaging systems - which
reflects our position as the only large-scale, independent provider
of CZT. At the same time, the geopolitical conflict continues to
drive strong demand for our nuclear security products as
governments increase their defence spending.
"Whilst we have been significantly impacted during the period by
the inflationary environment and currency pressures, we are seeing
this ease in the second half and, combined with strong revenue
growth, expect to be EBITDA positive for H2 2023. Accordingly, with
the excellent revenue momentum and highest ever levels of customer
engagement, we look to the future with confidence."
For further information, please contact:
Kromek Group plc
Arnab Basu, CEO
Paul Farquhar, CFO +44 (0)1740 626 060
finnCap Ltd (Nominated Adviser and Broker)
Geoff Nash/Seamus Fricker/George Dollemore/Emily
Watts
- Corporate Finance
Tim Redfern/Charlotte Sutcliffe - ECM +44 (0)20 7220 0500
Gracechurch Group (Financial PR)
Harry Chathli/Claire Norbury +44 (0)20 4582 3500
Kromek Group plc
Kromek Group plc is a leading developer of radiation detection
and bio-detection technology solutions for the advanced imaging and
CBRN detection segments. Headquartered in County Durham, UK, Kromek
has manufacturing operations in the UK and US, delivering on the
vision of enhancing the quality of life through innovative
detection technology solutions.
The advanced imaging segment comprises the medical (including CT
and SPECT), security and industrial markets. Kromek provides its
OEM customers with detector components, based on its core cadmium
zinc telluride (CZT) platform, to enable better detection of
diseases such as cancer and Alzheimer's, contamination in
industrial manufacture and explosives in aviation settings.
In CBRN detection, the Group provides nuclear radiation
detection solutions to the global homeland defence and security
market. Kromek's compact, handheld, high-performance radiation
detectors, based on advanced scintillation technology, are
primarily used to protect critical infrastructure and urban
environments from the threat of 'dirty bombs'.
The Group is also developing bio-security solutions in the CBRN
detection segment. These consist of fully automated and autonomous
systems to detect a wide range of airborne and liquid-based
pathogens.
Kromek is listed on AIM, a market of the London Stock Exchange,
under the trading symbol 'KMK'. Further information is available at
www.kromek.com.
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014. Upon the publication
of this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
Operational Review
During the six months to 31 October 2022, Kromek made excellent
progress in both the advanced imaging and CBRN detection segments
of the business. The Group delivered on its existing contracts and
development programmes, won new and repeat orders and experienced
significantly increased customer engagement regarding future
projects. Revenue for H1 2023 was 44% higher than the same period
of the prior year, representing significant growth in both the
advanced imaging and CBRN detection segments.
Advanced Imaging Segment
The advanced imaging segment comprises the medical imaging,
security screening and industrial screening markets. Kromek
provides its OEM customers with detector components, based on its
core cadmium zinc telluride ("CZT") platform, to enable better
detection of diseases such as cancer and cardiac conditions,
contamination in industrial manufacture and explosives in aviation
settings.
In this segment, commercial engagement with customers consists
of an initial design phase followed by incorporation of the Group's
detectors and technologies into a customer's system and then the
award to the Group of a multi-year supply contract, which provides
long-term revenue visibility.
Medical Imaging
During the period, Kromek continued to fulfil its existing
supply orders in medical imaging and progress its development
programmes. A key milestone was the introduction by Spectrum
Dynamics of the VERITON-CT 400 Series, the world's first digital
SPECT/CT scanner capable of high energy imaging, which uses
Kromek's CZT detector technology. Kromek believes that this product
is receiving wide-ranging interest and the Group's shipments to
Spectrum Dynamics are ramping up as expected.
In its regular repeat business, Kromek received two new orders
worth a total of $751k from existing OEM customers. One order was
for the supply of detectors for bone mineral densitometry
applications and the other was from a US medical imaging customer
that is using Kromek's CZT detectors in their gamma probes for
nuclear medical applications, with this system having received FDA
approval last year.
Under Kromek's development programme for ultra-low dose MBI
technology that is based on the Group's CZT-based SPECT detectors,
work progressed with the Group's OEM partner to prepare the system
for clinical trials in the US. This technology can significantly
improve the early detection of breast cancer in women with dense
breast tissues. Post period, as also announced today, the Group
received approximately GBP2.5m in funding from Innovate UK for two
programmes to further develop an MBI system. The projects are being
conducted in collaboration with the Newcastle-upon-Tyne Hospitals
NHS Foundation Trust, the University of Newcastle-Upon-Tyne and
University College London.
Over the last eighteen months, the Group has received a
significant increase in interest from partners for development
programmes in the medical imaging market with the Group now working
with eight tier 1 and tier 2 OEMs in its key target areas of SPECT
and CT. As a result, the Board remains confident in the growth
prospects for this market and the Board expects some of these
engagements to transition to formal significant contracts for the
supply of CZT detectors and modules. The Board expects to announce
significant contract wins for the Group in the near term.
Security & Industrial Screening
In security and industrial screening, Kromek continued to
deliver under its existing component supply agreements and
development programmes. The Group also secured a new OEM partner in
security screening.
CBRN Detection Segment
In CBRN detection, the Group provides nuclear radiation
detection solutions to the global homeland defence and security
market, which are primarily used to protect critical infrastructure
and urban environments from the threat of 'dirty bombs'. Kromek's
portfolio also includes a range of high-resolution detectors and
measurement systems used for civil nuclear applications, primarily
in nuclear power plants and research establishments. In addition,
the Group is developing bio-security solutions to detect a wide
range of airborne pathogens.
Nuclear Security
The Group received strong demand for its nuclear security
platforms - D3S and D5 - which consist of a family of products
designed to cater for the varying demands of homeland security and
defence markets. Kromek was awarded multiple orders, participated
in an increasing number of tenders and established key distribution
partnerships to support continued expansion in this market.
Accordingly, the Group is on track for a record year in detector
delivery in nuclear security.
During the period, the Group received, and delivered, a $1.3m
contract from a US customer for the D3M and a $695k order from a US
federal entity for the D3S-ID, both of which were repeat orders.
Since period end, the Group has received, and delivered, two
contracts, totalling GBP1.5m, for the supply of its D3M and
D3S-based nuclear security products to European government
end-users - with the contracts having been secured with Kromek
distribution and procurement partners. The Group is also in the
process of delivering a $836k order from a US government customer
for the D3S-ID, which is a repeat order secured post period. The
large proportion of repeat orders reflects the increasingly regular
nature of the Group's business in this market.
The Group is expanding channels-to-market for its nuclear
security products, as well as supporting the generation of regular,
repeat business, through the establishment of a distribution
partnership with Smiths Detection, a global leader in threat
detection and security screening technologies for aviation, ports
and borders, defence and urban security markets. During the period,
the Group signed a distribution agreement for Smiths Detection to
distribute Kromek's nuclear security products - with a focus on the
D3 and D5 series - to North and South American markets and, post
period, a further agreement was signed for distribution to the
Middle East and certain key markets in Asia and Australasia. To
date, the Group has delivered over 1,400 detectors under this
partnership.
Civil Nuclear
Business in the civil nuclear market progressed as expected,
with regular sales through the Group's distributor network and
customers. During the period, the Group served 48 customers in this
market.
Biological-Threat Detection
Kromek is developing bio-security solutions consisting of fully
automated and autonomous systems to detect a wide range of airborne
and liquid-based pathogens for the purposes of national security
and protecting public health.
During the period, the Group continued to deliver on its
development programmes. This includes a long-running programme with
the Defense Advanced Research Projects Agency, an agency of the US
Department of Defense, for a system that is designed to be
networkable and provide wide-area monitoring capability in near
real-time. The Group's work with the UK government resulted in the
award of a contract, post period, by a UK government department for
a three-year programme worth GBP4.9m to develop and supply
biological threat detection systems. The contract also includes an
option for extended maintenance services after the initial
term.
The Group continues to work with the UK government and
government agencies regarding policy concerning biological
screening and its implementation. The Group is also engaging with
US authorities as well as with private sector organisations to
develop and finalise a number of use applications for this
technology.
R&D, IP and Manufacturing
Kromek continued to execute on its programmes for the expansion
of production capacity and increased process automation, with
particular progress being made at its CZT manufacturing facility in
the US. These programmes are on track and are resulting in greater
manufacturing productivity and cost efficiencies.
Kromek is focused on developing the next generation of products
for commercial application in its core markets. As noted, during
the period the Group continued to advance development programmes
with a number of partners, with particular progress in medical
imaging and biological-threat detection.
In H1 2023, Kromek applied for 4 new patents and had 2 patents
granted across 5 patent families, bringing the total number of
patents held by the Group to in excess of 240. The new applications
cover innovations in both of the Group's segments.
Financial Review
Revenue for the six-month period ended 31 October 2022 increased
by 44% to GBP6.8m (H1 2022: GBP4.7m) In particular, product revenue
increased significantly and accounted for 96% of the revenue for
the half.
H1 2023 H1 2022
(Unaudited) (Unaudited)
GBP'000 GBP'000
---------- ----- --------- -----
Product GBP6,540 96% GBP3,786 80%
---------- ----- --------- -----
R&D GBP245 4% GBP921 20%
---------- ----- --------- -----
Total GBP6,785 100% GBP4,707 100%
---------- ----- --------- -----
Gross profit increased to GBP2.7m (H1 2022: GBP2.2m) as result
of the higher revenue. Gross margin was 40.4% compared with 46.8%
for H1 2022, with the increase in cost of sales being due to
revenue mix and component price inflation as supply chain pressures
persisted.
Administrative expenses and distribution costs, including the
adverse impact of foreign exchange in the period, increased to
GBP8.0m (H1 2022: GBP6.4m). This is substantially due to an
increase in staff costs reflecting pay rises in line with the wider
economy and modest increased headcount to drive future revenue
growth; an increase in amortisation and depreciation; and higher
other overhead costs due to current inflationary pressures. Of the
GBP1.6m increase year-on-year, GBP0.5m represents the foreign
exchange impact of translating USD denominated expenses in the
period due to the weaker GBP against the USD in H1 2023 compared to
H1 2022.
In the first half of the prior year period, the Group benefited
from a one-off forgiveness of GBP1.3m of Paycheck Protection Loans
in the US, which was reported in other operating income. This was
non-recurring income, and the current period did not benefit from
this category of income, which accordingly impacted loss before tax
and adjusted EBITDA on a comparable basis.
As a result of the increased operating costs and lower other
operating income, operating loss was GBP5.2m (H1 2022: GBP2.9m
loss). After net finance costs of GBP0.5m (H1 2022: GBP0.3m), loss
before tax was GBP5.7m (H1 2022: GBP3.1m loss).
The adjusted EBITDA loss for the period was GBP2.7m (H1 2022:
GBP0.6m loss). Adjusted EBITDA is calculated as follows:
H1 2023 H1 2022 FY 2022
(Unaudited) (Unaudited) (Audited)
-------------
GBP'000 GBP'000 GBP'000
-------------- -------------
Loss before tax (5,671) (3,056) (6,129)
-------------- -------------
EBITDA adjustments:-
-------------- -------------
Net interest 458 276 548
-------------- -------------
Depreciation 962 854 1,751
-------------- -------------
Amortisation 1,465 1,265 2,569
-------------- -------------
Share-based payments 120 120 236
-------------- -------------
COVID-19 related
items
-------------- -------------
Exceptional items - (89) (132)
-------------- -------------
Adjusted EBITDA* (2,666) (630) (1,157)
-------------- -------------
*Adjusted EBITDA is defined as earnings before interest,
taxation, depreciation, amortisation, exceptional items and
share-based payments. Share-based payments are added back when
calculating the Group's adjusted EBITDA as this is currently an
expense with a zero direct cash impact on financial
performance.
Investment in product development was GBP2.6m for the six-month
period ended 31 October 2022 (H1 2022: GBP3.1m). The expenditure in
H1 2023 was in technology and product developments, reflecting the
continuing investment and commitment in new and enhanced products,
platforms and CZT productivity improvements that can be
commercially marketed. Amortisation of such development activity in
the period was GBP1.2m (H1 2022: GBP1.0m).
Cash and cash equivalents at 31 October 2022 were GBP1.0m (30
April 2022: GBP5.1m). The GBP4.1m decrease in cash over the
six-month period is the net result of:
-- GBP(2.7)m - operating loss for the period
-- GBP(1.4)m - net working capital movements and income taxes
received, including a GBP1.9m reduction in trade payables
-- GBP(2.8)m - investment in development costs and capital expenditure
-- GBP2.0m - net new funds raised less debt and interest payments
-- GBP0.8m - effect of foreign exchange rate changes
Since period end, the cash position has remained largely stable,
with the Group having cash and cash equivalents of GBP1.3m at 23
January 2023. This reduced cash burn reflects an increase in
revenue run rate as expected; inflation beginning to stabilise; the
GBP strengthening against the USD; and that no debt repayments have
been required to be made in the second half to date.
At 31 October 2022, total borrowings included in current
liabilities were GBP5.7m (30 April 2022: GBP5.7m), of which GBP5.0m
related to bank borrowings. The Board is currently working towards
the refinancing of the GBP5.0m banking facility and expects to
complete this in the short term.
Inventories increased by GBP0.4m in the period from GBP10.5m at
30 April 2022 to GBP10.9m at 31 October 2022, and significantly
higher than the GBP7.3m at 31 October 2021. The increase in
inventories over the six-month period reflects a GBP0.6m impact of
foreign exchange as most of the Group's inventories are USD
denominated. Adjusting for the foreign exchange impact, inventories
reduced by GBP0.2m in the period. As noted previously, the increase
compared with the same date of the prior year is due to the Group
increasing its inventory level to secure surety of supply, against
a backdrop of supply chain disruption, for delivering its full year
revenues.
Outlook
The revenue momentum of the first half of the year has carried
through to the second half with Kromek on track to deliver record
revenues for the full year 2023, the highest in the history of the
Group.
The Group has excellent visibility over full year revenue
forecasts of 91% comprising 84% contracted or already shipped, 5%
awarded and going through contract negotiation and 2% being
provided by its regular repeat order business, and with the
remaining 9% representing a gap to forecast that is anticipated to
be closed by known pipeline of opportunities. As a result, the
Group expects to report year-on-year revenue growth of over 45%,
reflecting substantial growth in both its advanced imaging and CBRN
detection segments. The order book continues to grow giving good
visibility well into next year.
Specifically, the anticipated growth in the advanced imaging
segment is based on delivery under the Group's existing long-term
contracts, such as Spectrum Dynamics, which is ramping up the roll
out of its next generation SPECT/CT scanners; new orders won last
year; and the sustained demand being received for Kromek's CZT
products. Since becoming the only independent large-scale supplier
of CZT, Kromek has been approached by an increasing number of
customers that are looking for an independent manufacturer of CZT.
As noted, Kromek is in an active engagement process with eight tier
1 and tier 2 OEMs and expects to announce a number of contracts
across the Group in the near term.
The current geo-political environment is driving increased
interest in the Group's products in the CBRN detection segment from
public authority suppliers, governments and government agencies. In
the past year, Kromek has sold thousands of detectors that have
been deployed to protect events such as gatherings of heads of
states and the football World Cup as well being used in conflict
zones. Kromek expects this growth to continue in the second half
and beyond.
In the first half of the year, the Group experienced cost
inflation that, together with the strengthening of the USD against
the GBP, had an adverse impact on EBITDA. In the second half, the
Group has seen inflation stabilising and the GBP strengthening
against the USD. The Group also anticipates improvement in gross
margin based on the reduction in cost pressures and a normalised
revenue mix. This, along with the substantial increase in revenue
in the second half, is expected to see the Group become EBITDA
positive and broadly cashflow neutral for H2. However, this is
expected to only partially offset the H1 2023 EBITDA loss. The
Group continues to look at every opportunity to control its costs,
improve collections and manage cash flow.
With the excellent revenue momentum, highest ever levels of
customer engagement and the fundamentals of the business remaining
strong, the Board continues to look to the future with
confidence.
Consolidated condensed income statement
For the six months ended 31 October 2022
Six months Six months Year
ended 31 ended 31 ended
October October 30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Note
Continuing operations
Revenue 4 6,785 4,707 12,055
Cost of sales (4,046) (2,503) (6,419)
Gross profit 2,739 2,204 5,636
Other operating income 5 - 1,343 1,410
Distribution costs (319) (273) (551)
Administrative expenses (including
operating expenses) (7,633) (6,143) (12,208)
Operating loss (5,213) (2,869) (5,713)
Exceptional impairment reversal
on trade receivables and amounts
recoverable on contract 6 - 89 132
Operating results (post exceptional
items) (5,213) (2,780) (5,581)
----------- ----------- ---------
Finance income - 6 34
Finance costs (458) (282) (582)
Loss before tax (5,671) (3,056) (6,129)
Tax 7 601 707 1,211
Loss from continuing operations (5,070) (2,349) (4,918)
Losses per share
-basic (p) 9 (1.2) (0.5) (1.1)
Consolidated condensed statement of comprehensive income
For the six months ended 31 October 2022
Six months
ended Year
Six months
ended 31
October 31 October ended
30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Loss for the period (5,070) (2,349) (4,918)
-------------- -------------- ------------
Items that may be recycled to
the income statement
Exchange gains/(losses) on translation
of foreign operations 2,017 1,154 2,063
-------------- -------------- ------------
Total comprehensive loss for the
period (3,053) (1,195) (2,855)
============== ============== ============
Consolidated condensed statement of financial position
31 October 31 October 30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
Note (Unaudited) (Unaudited) (Audited)
Non-current assets
Goodwill 1,275 1,275 1,275
Other intangible assets 30,539 26,240 28,375
Property, plant and equipment 10 10,796 10,884 10,944
Right-of-use asset 4,263 3,884 3,874
46,873 42,283 44,468
Current assets
Inventories 10,866 7,336 10,503
Trade and other receivables 6,692 7,166 6,429
Current tax assets 349 422 942
Cash and bank balances 956 10,243 5,081
18,863 25,167 22,955
----------- ----------- ---------
Total assets 65,736 67,450 67,423
=========== =========== =========
Current liabilities
Trade and other payables (5,986) (5,959) (7,855)
Lease obligation (413) (389) (375)
Borrowings (5,693) (4,813) (5,716)
(12,092) (11,161) (13,946)
Net current assets 6,771 14,006 9,009
Non-current liabilities
Deferred income (1,071) (1,221) (1,131)
Lease obligation (4,505) (4,111) (4,161)
Borrowings (3,565) (1,977) (749)
Total liabilities (21,233) (18,470) (19,987)
Net assets 44,503 48,980 47,436
As at 31 October 2022
Equity
Share capital 12 4,319 4,319 4,319
Share premium account 72,943 72,943 72,943
Merger reserve 21,853 21,853 21,853
Translation reserve 4,080 1,154 2,063
Accumulated losses (58,692) (51,289) (53,742)
Total equity 44,503 48,980 47,436
Consolidated condensed statement of changes in equity
For the six months ended 31 October 2022
Equity attributable to equity holders of the
Group
Share
Share Premium Merger Translation Accumulated
Capital Account Reserve Reserve Losses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 May 2022 4,319 72,943 21,853 2,063 (53,742) 47,436
Loss for the period - - - - (5,070) (5,070)
Other comprehensive
income for the period - - - 2,017 - 2,017
Total comprehensive
loss for the period - - - 4,080 (5,070) (990)
Transactions with
shareholders recorded
in equity
Credit to equity for
equity-settled
share-based
payments - - - - 120 120
Balance at 31 October
2022 4,319 72,943 21,853 4,080 (58,692) 44,503
Balance at 1 May 2021 4,319 72,943 21,853 - (49,060) 50,055
Loss for the period - - - - (2,349) (2,394)
Other comprehensive
income for the period - - - 1,154 - 1,154
Total comprehensive
loss for the period - - - 1,154 (2,349) (1,195)
Transactions with
shareholders recorded
in equity
Credit to equity for
equity-settled
share-based
payments - - - - 120 120
Balance at 31 October
2021 4,319 72,943 21,853 1,154 (51,289) 48,980
Balance at 1 May
2021 4,319 72,943 21,853 - (49,060) 50,055
Loss for the period - - - - (4,918) (4,918)
Other comprehensive
income for the period - - - 2,063 - 2,063
Total comprehensive
loss for the year - - - 2,063 (4,918) (2,855)
Transactions with
shareholders recorded
in equity
Credit to equity for
equity-settled
share-based
payments - - - - 236 236
Balance at 30 April
2022 4,319 72,943 21,853 2,063 (53,742) 47,436
Consolidated condensed statement of cash flows
For the six months ended 31 October 2022
Six months Six months Year
ended 31 ended 31 ended 30
October October April
2022 2021 2022
Note GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Net cash used in operating activities 11 (4,026) (2,213) (3,530)
Investing activities
Interest received - 6 34
Purchases of property, plant and
equipment (186) (260) (651)
Purchases of patents and trademarks (82) (96) (179)
Capitalisation of research and
development costs (2,580) (3,125) (5,619)
Net cash used in investing activities (2,848) (3,475) (6,415)
Financing activities
New borrowings 3,840 560 760
Interest paid (326) (162) (340)
Payment of loan and borrowings (1,047) (704) (1,340)
Finance lease repayments (347) (322) (646)
Net cash generated from / (used
in) financing activities 2,120 (628) (1,566)
Net decrease in cash and cash
equivalents (4,754) (6,316) (11,511)
Cash and cash equivalents at beginning
of period 5,081 15,602 15,602
Effect of foreign exchange rate
changes 629 957 990
Cash and cash equivalents at end
of period 956 10,243 5,081
=========== =========== =========
Notes to the unaudited interim statements
For the six months ended 31 October 2022
1. Basis of preparation
This interim financial report does not constitute statutory
accounts as defined in section 434 of the Companies Act 2006. The
auditors reported on the Kromek Group plc financial statements for
the year ended 30 April 2022, their report was unqualified and did
not contain a statement under section 498(2) or (3) of the
Companies Act 2006. The Group's consolidated annual financial
statements for the year ended 30 April 2022 have been filed with
the Registrar of Companies and are available on the Group's
website: www.kromek.com .
2. Going concern
The Directors have a reasonable expectation that the going
concern basis of accounting remains appropriate and that the Group
has adequate resources and facilities to continue in operation for
the next 12 months based on its cash flow forecasts prepared.
Accordingly, the Group's unaudited interim statements for the six
months ended 31 October 2022 have been prepared on a going concern
basis which contemplates the realisation of assets and the
settlement of liabilities and commitments in the normal course of
operations.
3. Interim report
This interim financial report will be available from the Group's
website at www.kromek.com .
4. Business and geographical segments
Products and services from which reportable segments derive
their revenues
For management purposes, the Group is organised into two
business units (UK and USA) and it is on these operating segments
that the Group is providing disclosure.
The chief operating decision maker is the Board of Directors who
assess performance of the segments using the following key
performance indicators; revenue, gross profit, operating profit and
EBITDA. The amounts provided to the Board with respect to assets
and liabilities are measured in a way consistent with the Financial
Statements.
The turnover, profit on ordinary activities and net assets of
the Group are attributable to one business segment, i.e. the
development of digital colour x-ray imaging enabling direct
materials identification, as well as developing a number of
detection products in the industrial market. Whilst results are not
measured by end market, the Group currently categorises its
customers as belonging to the advanced imaging and CBRN detection
markets.
4. Business and geographical segments (continued)
A geographical analysis of the Group's revenue by destination is
as follows:
Six months Six months Year
ended 31 ended 31 ended
October October 30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
United Kingdom 298 928 2,033
North America 3,306 1,916 5,807
Asia 424 125 1,556
Europe 2,726 1,695 2,601
South America 5
Middle East 26
Australasia - 43 58
Total revenue 6,785 4,707 12,055
A geographical analysis of the Group's revenue by origin is as
follows:
Six months ended 31 October 2022
UK Operations USA Operations Total for
GBP'000 GBP'000 Group
GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 5,621 7,313 12,934
-Revenue from grants 38 - 38
-Revenue from contract customers 110 55 165
Total sales by segment 5,769 7,368 13,137
Removal of inter-segment sales (5,126) (1,226) (6,352)
-------------- --------------- ----------
Total external sales 643 6,142 6,785
============== =============== ==========
Segment result - operating loss (2,251) (2,962) (5,213)
Net interest (325) (133) (458)
Loss before tax (2,576) (3,095) (5,671)
Tax credit 601 - 601
-------------- --------------- ----------
Loss for the period (1,975) (3,095) (5,070)
============== =============== ==========
Other information
Property, plant and equipment additions 21 165 186
Depreciation of property, plant
and equipment 526 436 962
Intangible asset additions 1,510 1,152 2,662
Amortisation of intangible assets 782 683 1,465
-------------- --------------- ----------
Balance Sheet
Total assets 34,693 31,043 65,736
-------------- --------------- ----------
Total liabilities (15,225) (6,008) (21,233)
-------------- --------------- ----------
4. Business and geographical segments (continued)
Inter-segment sales are charged at prevailing market prices.
No impairment losses were recognised in respect of property,
plant and equipment and goodwill.
Six months ended 31 October 2021
Total for
UK Operations USA Operations Group
GBP'000 GBP'000 GBP'000
Revenue from sales
Revenue by segment:
-Sale of goods and services 3,487 3,813 7,300
-Revenue from grants 409 - 409
-Revenue from contract customers 374 142 516
Total sales by segment 4,270 3,955 8,225
Removal of inter-segment sales (2,459) (1,059) (3,518)
-------------- --------------- ----------
Total external sales 1,811 2,896 4,707
============== =============== ==========
Segment result - operating loss (2,382) (398) (2,780)
Net interest (162) (114) (276)
Loss before tax (2,544) (512) (3,056)
Tax credit 707 - 707
-------------- --------------- ----------
Loss for the period (1,837) (512) (2,349)
============== =============== ==========
Other information
Property, plant and equipment additions 65 195 260
Depreciation of property, plant
and equipment 506 348 854
Intangible asset additions 2,627 594 3,221
Amortisation of intangible assets 751 514 1,265
-------------- --------------- ----------
Balance Sheet
Total assets 41,942 25,508 67,450
-------------- --------------- ----------
Total liabilities (11,911) (6,559) (18,470)
-------------- --------------- ----------
The accounting policies of the reportable segments are the same
as the Group's accounting policies. Segment profit or loss
represents the profit or loss earned by each segment without
allocation of the share of profits or losses of associates, central
administration costs including Directors' salaries, investment
revenue and finance costs, and income tax expense. This is the
measure reported to the Group's Chief Executive for the purpose of
resource allocation and assessment of segment performance.
5. Other Operating Income
In the prior period to 31 October 2021, other operating income
comprised the forgiveness of PPP loans granted by the US Government
and grants received from the Coronavirus Job Retention Scheme
provided by the UK Government in response to COVID-19's economic
impact on businesses. There is no other operating for the period to
31 October 2022.
6. Exceptional Items
The Group has reversed GBPnil in relation to an item impaired in
the full year 2020 financial statements (six months ended 31
October 2021: GBP89k).
7. Tax
The Group has recognised R&D tax credits of GBP601k for the
six months ended 31 October 2022 (six months ended 31 October 2021:
GBP707k).
8. Dividends
The Directors do not recommend the payment of a dividend (six
months ended 31 October 2021: GBPnil).
9. Losses per share
The calculation of the basic and diluted loss per share is based
on the following data:
Losses
Six months Six months Year
ended 31 ended 31 ended
October October 30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Losses for the purposes of basic loss
per share being net loss attributable
to owners of the Group (5,070) (2,349) (4,918)
Six months Six months Year
ended 31 ended 31 ended
October October 30 April
2022 2021 2022
'000 '000 '000
(Unaudited) (Unaudited) (Audited)
Number of shares
Weighted average number of ordinary
shares for the purposes of basic loss
per share 431,852 431,852 431,852
Effect of dilutive potential ordinary
shares:
Share options and warrants 315 618 351
Weighted average number of ordinary
shares for the purposes of diluted loss
per share 432,167 432,470 432,203
Basic (p) (1.2) (0.5) (1.1)
Basic earnings per share is calculated by dividing the loss
attributable to shareholders by the weighted average number of
ordinary shares in issue during the year. IAS 33 requires
presentation of diluted EPS when a company could be called upon to
issue shares that would decrease earnings per share or increase the
loss per share. For a loss-making company with outstanding share
options, net loss per share would be decreased by the exercise of
options. Therefore, the anti-dilutive potential ordinary shares are
disregarded in the calculation of diluted EPS.
10. Property, plant and equipment
During the six months ended 31 October 2022, the Group acquired
property, plant and equipment with a cost of GBP186k (six months
ended 31 October 2021: GBP260k).
11. Notes to the cash flow statement
Six months Six months Year
ended 31 ended 31 ended
October October 30 April
2022 2021 2022
GBP'000 GBP'000 GBP'000
(Unaudited) (Unaudited) (Audited)
Loss for the period (5,070) (2,349) (4,918)
Adjustments for:
Finance income - (6) (34)
Finance costs 458 282 582
Income tax credit (601) (707) (1,211)
Depreciation of property, plant and
equipment 962 854 1,751
Amortisation of intangible assets 1,465 1,265 2,569
Share-based payment expense 120 120 236
PPP loan forgiveness - (1,253) (1,443)
Impairment of intangible asset - - -
Loss on disposal - - -
Operating cash flows before movements
in working capital (2,666) (1,794) (2,468)
Increase in inventories (363) (1,134) (4,301)
(Increase) / decrease in receivables (263) (524) 215
(Decrease) / increase in payables
and deferred income (1,929) (61) 1,741
Cash used in operations (5,221) (3,513) (4,813)
Income taxes received 1,195 1,300 1,283
Net cash used in operating activities (4,026) (2,213) (3,530)
12. Share capital
During the period, no ordinary shares (six months ended 31
October 2021: nil) were issued to satisfy the exercise of employee
share options.
13. Events after the balance sheet date
There are no significant or disclosable post-balance sheet
events.
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END
IR URSAROSUAOUR
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